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At its core, the Senate health bill slashes Medicaid to finance a tax cut for the rich

It’s not actually about repealing Obamacare for the individual marketplaces.

Tom Williams/CQ Roll Call/Getty

With Senate Republicans’ release of their health care bill Thursday, the party’s grand design on health policy is now impossible to mistake.

The party’s chief goal is to slash Medicaid’s spending on poor Americans, so they can cut taxes for rich Americans. It’s a massive redistribution from the poor to the rich.

The GOP’s policy push is no longer about repealing Obamacare or even really trying to make its individual insurance markets, which they repeatedly criticize as “failing,” work better.

Instead, they are trying to ram through a Medicaid cut and tax cut bill into law, under the guise of calling it “Obamacare repeal.”

And it may just work. The Senate is scheduled to vote on it next week, and there will be tremendous partisan pressure on holdout senators to back the bill that has become President Donald Trump’s top legislative priority.

This bill does not repeal Obamacare for the individual insurance markets

Obamacare, you will recall, overhauled the individual insurance markets in the US. Rather than letting people fend for themselves, it regulated what sorts of plans could be sold and what they had to cover, it created a subsidy system pegged to income to help people pay for insurance, and it mandated that individuals purchase insurance or face a financial penalty.

And now, as experts read through the Senate bill’s changes to how the individual insurance markets function, the initial reaction from many is that the changes are less than we might have expected. Nicholas Bagley, a University of Michigan law professor with an expertise in health policy, tweeted, “I have to say, this looks an awful lot like a skimpier version of Obamacare. Very hard to call this repeal.”

Now, the bill makes some very real changes to the individual markets that will affect many people. For instance, it makes the subsidies for buying insurance there less generous, and eliminates the “individual mandate” penalty for being uninsured. You can check out preliminary details of how all this might play out in Sarah Kliff’s explainer on the Senate bill. And more could emerge as policy wonks continue to dig into the bill.

But in part due to the constraints of the budget reconciliation process, and in part due to political calculations, at this point it seems like the Senate bill leaves the fundamental structure of Obamacare’s changes to the individual insurance market in place.

That doesn’t make the bill a nothingburger, though — far from it. Because its real health policy action is in its sweeping, dramatic cuts to Medicaid.

The Senate bill instead guts Medicaid

Like the House bill, the Senate bill overhauls Medicaid spending in two key ways.

First, it rolls back Obamacare’s Medicaid expansion, which funded coverage for millions more low-income Americans eligible for coverage. As Kliff writes:

The Senate bill would begin ratcheting down that Medicaid expansion funding in 2021. By 2024, states would get that same match rate they typically get to cover other populations.

This change in isolation would mean that, for the most part, by 2024 we’d be back to the pre-Obamacare status quo as far as Medicaid enrollees go. This is a policy that, whatever you may think of it, can fairly be described as a repeal of a major part of Obamacare.

But then things go further.

Second, and more fundamentally, the bill completely overhauls Medicaid’s financing. It does so by converting Medicaid to a “per-capita cap” system, in which the federal government would no longer commit to open-ended funding of enrollees’ health bills.

The Senate bill has not yet been scored by the Congressional Budget Office, but similar changes to Medicaid in the House bill (combined with the rollback of the expansion) were scored at cutting $880 billion from the program over the next 10 years — a truly massive amount.

Importantly, this change is in no way, shape, or form a response to any supposed problems caused by Obamacare. It is instead a change to the underlying Medicaid program that conservatives have long wanted to make even before Obamacare passed.

Conservatives want this change in part for ideological reasons — they say they don’t like government spending and think federal programs for the poor are too generous — but also in part for practical ones, because if less money is spent on Medicaid, that frees up money to cut taxes on the wealthy.

That’s particularly clear in this bill, because most of the savings from these sweeping Medicaid cuts aren’t used to reduce the deficit — they’re being used to cut taxes, mostly on the wealthy.

And oh, does the bill cut taxes on the wealthy

The tax cuts in the Senate bill include cutting taxes on net investment income for wealthy people, repeals a new Medicare tax added on wealthy people, and eliminates taxes on health insurers, medical device companies, and tanning salons.

For instance, the Affordable Care Act added a new tax of 3.8 percent on net investment income (basically, capital gains and dividends) for individuals making over more than $200,000 a year, or married couples making over $250,000.

The Senate health bill not only repeals that tax, it makes that repeal immediate — applying it even to capital gains earlier this year. As Matt Yglesias writes, this may be its crudest giveaway to the rich:

There’s absolutely no reason to think a retroactive tax cut will boost job creation and growth. You’re essentially increasing people’s incentives to travel back in time and create jobs earlier in the year. Or, rather, you’re not increasing anyone’s incentive to do anything. You’re just shoveling money into the pockets of the least needy families in the country.

So now that we finally have a Senate bill, it is unmistakably clear what the Republicans’ biggest health policy priorities are — not getting rid of the Obamacare individual insurance market architecture they’ve criticized so much, but instead going after Medicaid and using it to pay for tax cuts for the rich.

That’s how this bill should be understood.